ARTHUR-D.-LITTLE

Arthur D. Little (ADL) today published two reports analyzing the EU
Commission’s proposals to extend the regulations of the Third Gas
Directive to pipelines from third countries supplying gas to the EU.
They find that the recent European Commission-Gazprom settlement makes
the amendment unnecessary, and that the proposed legislation will fail
in its objective of enhancing market competition, potentially even
decreasing supply.

The proposed directive suggests expanding EU regulation to import
pipelines from non-EU countries, risking potential legal challenges and
future international investment in gas-export infrastructure. Existing
agreements between Spain and Italy and third countries, such as Algeria,
Libya, Tunisia and Morocco, would need to be renegotiated, creating
scope for counter demands. The economic conditions for future pipeline
projects such as East Med would become less predictable, creating the
risk that gas would go to non-EU markets. Proposed derogations or
exemptions cannot be guaranteed, and their outcome is uncertain. This
could have a detrimental impact on supply, and therefore prices – the
exact opposite of its stated aims.

The Spring 2018 settlement between the European Commission and Gazprom
set out binding legal obligations, with mandatory actions agreed to
prevent alleged anti-competitive behavior by Gazprom. This significantly
changes the EU gas supply landscape, rendering the amendment
unnecessary, according to ADL’s analysis. Additionally, greater
liberalization means the market is now beginning to function very well,
without requiring further legislation.

Michael Kruse, Partner and Head of Energy & Utilities in Central
Europe
, explains: “The Gazprom settlement has significantly shifted
the market context compared to when the Gas Directive amendment was
first proposed. It creates a relevant, important change which needs to
be recognized in the ongoing discussions around the amendment, and our
analysis recommends carrying out a detailed impact assessment to check
it is still necessary. At the very least, the European Commission should
wait for the impact of the settlement to bed in, before introducing
further changes.”